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Using Housing Wealth and Qualified Retirement Benefits to Facilitate Asset Division in ‘Silver Divorce’

SUMMARY OF THE CONTENT OF THE ACTIVITY    

By Barry H. Sacks, Peter Neuwirth, and Mary Jo Lafaye

A Note from the Authors/Presenters: We are happy to welcome you to a two-hour program entitled “Using Housing Wealth to Facilitate Asset Division in ‘Silver Divorce.’” It is approved by the California State Bar as a presentation for two hours of MCLE and by the Certified Financial Planner Association as a Continuing Education class for CFPs and other financial professionals.

The program is divided into five segments:

Actuary and Author Peter Neuwirth, FSA, FCA

The First Segment: The first segment of the program is an introductory segment providing the foundation for the subsequent segments. It points out the substantial prevalence of “Silver Divorce” (i.e., divorce among couples where one or both parties are age 50 or greater) and notes that by that age, couples generally have accumulated some wealth in the form of home ownership and retirement assets and/or accrued benefits (often in the form of a 401(k) account, a defined benefit pension accrual, or a rollover IRA). This introductory segment also provides some basic information about reverse mortgage loans. In addition, by the age of Silver Divorce, the divorcing couple’s children, if any, have grown up and are independent of the couple. As a result of that accumulation, the primary focus of the divorce is generally the division of those assets.  In addition, after the assets are divided, the concern of each of the parties (and of their advisors and advocates) is to ensure adequate cash flow during retirement (whether impending or already underway).

The Second Segment. The second segment of the program is a series of quantitative examples, illustrating, in a variety of situations, how housing wealth, accessed by means of a reverse mortgage loan, can achieve the following objectives: 1) Facilitate the division of assets;  2) Minimize cash outflow for housing; and 3) Thereby leave adequate cash available for other living expenses.  The tax aspects of the transactions in these examples are discussed.

Mary Jo Lafaye, Reverse Mortgage Specialist

The Third Segment. The third segment of the program is a continuation of the second segment, but with retirement cash flow adequacy concerns added to the mix, along with home equity and retirement plan assets. The objectives of this second set of examples are the same as those of the first set of examples. And the tax aspects of the transactions in this second set of examples are discussed.

The Fourth Segment. The fourth segment of the program is a discussion of some of the key actuarial considerations in determining: 1) The value of Defined Benefit (“DB”) pension benefits; 2) The separate and community interests in both DB and DC (Defined Contribution) plans. and 3) Methods to avoid having to utilize a QDRO to facilitate the division of assets.

The Fifth Segment. The fifth segment of the program sets out information on how reverse mortgages work. The intention is to provide practitioners with a better understanding of this financial tool and to dispel many of the widely held misunderstandings.

This program has been presented by the applicants: 

  • It received MCLE credit when it was presented at a meeting of the American Academy of Matrimonial Lawyers;
  • It was also presented at a meeting of the American Association of Divorce Financial Planners.
  • In addition, a shorter version was published as an article in the Journal of the American Association for Divorce Financial Analysis.

Barry H. Sacks

Provider certification has been obtained for MCLE credit:

  1. As an in-person presentation to various groups of attorneys;
  2. As a DVD that can be purchased by a law firm or by individual attorneys;
  3. As a streaming presentation, which can be watched “on demand” by individual attorneys or groups.

For more information, please send an email to Barry H. Sacks.